SigmaRoc PLC (LON:SRC), a construction materials firm focused on emerging markets, has enjoyed a decent first week on AIM with shares up almost 20%.
Having slipped into the cash shell vacated by Messaging International, it has raised £500,000 to keep the lights on while chief executive Max Vermorken and his team work on the company’s first deal.
Under the junior market’s Rule 15 it must make a purchase in the next six months, which means the clock is ticking.
However the group isn’t looking to do just one transaction – others will follow the initial deal.
For SigmaRoc is what’s known as a buy-and-build play that is tapping into the construction boom occurring in south-east Africa – countries such as Zambia, Tanzania, Botswana and Mozambique.
Here mining, oil and gas are transforming local economies, while there is huge investment from the World Bank, the IMF and, of course, resource-hungry China.
All of this requires an active construction sector. “It means there is a huge amount of growth for products we want to sell,” said Vermorken.
The SigmaRoc chief, who helped steer one of the industry’s biggest mergers when he was at Swiss cement maker Holcim, was playing his cards close to his chest when quizzed about acquisition opportunities.
In terms of scale, he and the team are looking at anything from £1mln to £50mln in value.
The target needs to be a decent sized player in the local market, Vermorken said and it must have significant potential to grow.
“We want a starting block that can be developed into something much bigger,” said Vermorken.
“You don’t need produce billions of tonnes of cement to be a volume business in a local market, you simply need to have a good presence.”
However this is not just a frontier play – there is hedge too against this risk, perceived and real, of working in emerging markets.
SigmaRoc is also looking to acquire niche construction businesses in more mature markets that provide a steady and reliable income stream.
“Investors should like this as the niche sector assets tend to have a nice flow of potential dividends,” said Vermorken.
Civil engineer Vermorken brings with him valuable experience gleaned from his time with Holcim, which is also complemented with a stint in private equity. So he knows all about buying and selling companies.
His non-executive directors are Dominic Traynor, an M&A lawyer and David Barrett.
Barrett co-founded London Concrete in 1997 and helped build it into a business from one plant to dozens around the capital before being sold to Aggregate Industries.
With experience at boardroom level and on the ground, it is just a case of getting the first deal off the ground.
“We are at the investigatory stage and because it is our first deal we need to do all the due diligence methodically and in detail.”